Senior Relationship Manager
Summary: Yields Pause - Adyen falls 40%
Good Morning,
Equities lost in a nervous session yesterday and in the last week, the US 500 is down 2.2%, the Wallstreet 30 -2.3% and the USTech100 -2.3%. the GER40 is at -1.5%
Dutch payments processor Adyen fell almost 40% yesterday on an earnings miss that acc to Reuters caused valuations to be questioned causing the company to lose 40% in Market capitalization.
CISCO could gain app 3% after good earnings, Walmart fell 2.2% despite beating expectations.
10 Year US Yields fell to 4.24 and the 2 Year is below 5% again, Althea points out that bonds can still be a good addition to the portfolio: Keep calm and consider bonds
In FX, the USD Index is hovering above the 200d Movind average, the Index is 103.35 and the moving average at 103.18. URUSD remains below 1.09 at 1.080 and GBPUSD 1.2740 ahead of the UK Retails sales at 8 this morning. Gold is holding at 1892 and Silver rose to 22.80.
Bitcoin was trading under pressure and fell to 26k
Peter wrote a good summary on state of green transformation energies and states: despite the commitment from governments and capital being made available for green investments, the returns across many green transformation stocks have been bad. The power point slides and hopes of the green transformation have certainly met a harsh reality in financial markets. If investors continue to bid down prices of green energy stocks then it will at one point begin to reduce available supply of capital because capital is always seeking the highest risk-adjusted returns.
China Evergrande Group has filed for protection from creditors in a U.S. bankruptcy Since mid-2021, companies accounting for 40% of Chinese home sales have defaulted acc to Reuters.
What do we look at going forward?
Today, UK retail sales and EU Inflation will be key, next week will be a slow week for data but I doubt that will the same for markets as we are expect the BRICS meeting in south Africa, the Jackson Hole summit and lots of nervousness. Stimulus measures from China to boost spending and investment are expected, if the PBOC does not cut rates next week, it would be a surprise. The data comes in the night to Monday.
It will also be interesting if the sell off in Adyen spills over to other shares with high valuations
Friday August 18
Data: UK Retail sales, HICP
Earnings: Palo Alto Networks, Deere, Estee Lauder
Monday August 21
Data: China 1 and 5 year Rates
Expiries
Physically Settled Futures
Expiring CFDs
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach